Following up on the update to my last post, the native iPhone calendar can assign new events to a category, but only if that category is created by iCal for the Mac (or presumably Outlook) and then synched to the iPhone. If you don't use either iCal for the Mac or Outlook, no categories on the iPhone. I wonder if the rumored Apple tablet will allow category creation independently? That in itself wouldn't be enough to get me to buy a tablet, however. I just want the iPhone calendar to do it without a mind-meld with either Outlook or iCal for the Mac.
Update: Well I stand corrected! After doing a few more syncs, I was able to bring multiple calendars onto the iPhone and now can create new events using any of those calendars. This works because Google Sync is mimicking the Exchange (Outlook) protocol on its end. So it works! Categories rock!! (Just they originally did on the Palm calendar.) And yes, Windows Mobile was playing catchup.